Bollywood actor Shah Rukh Khan who was served notices by the income -tax department for allegedly not paying proper tax on his income got a reprieve from Income Tax Appellate Tribunal (ITAT). In two related issues, ITAT ruled in favour of Khan, leaving the income tax department somewhat red faced.

According to Economic Times, the ITAT allowed SRK a deduction of Rs 10 crore that was paid to him for Kaun Banega Crorepati. The second instance was pertaining to a tax demand of Rs 7 crore, also for professional fees the actor had charged from Star India, the broadcaster.

Reportedly, the IT department had sent tax notices to the actor for avoiding tax about 8 months back. As per the ITAT ruling, Star India had entered into an agreement with Shah Rukh Khan for 104 episodes to host the game show. However, after 52 episodes, the TV channel decided to shelve the remaining episodes and wanted to recover the money from SRK.

Instead of returning the money, Khan struck a barter deal whereby he would secure sponsorship along with Kolkata Knight Riders IPL team. He would pay Rs 10 crore to the team and in return sponsorship rights were to be awarded to Star India.

Khan had claimed a deduction of Rs 10 crore — which he claimed was his expense — while computing his business income. The tax officer disallowed this and hence wanted Khan to pay tax on the income that included Rs 10 crore. In this case, ITAT ruled in favour of Khan.

According to Rakesh Bhargava, director, Taxmann.com, “The loss suffered by Star India due to non-production of another season of KBC with SRK was sought to be recouped by SRK with the earnings from the sponsorship of KKR IPL team. So, SRK paid Rs 10 crore to get sponsorship of KKR for Star India, even though he was not legally liable to incur such a huge sum.”

According to the people close to the development, the I-T department is now seeking to approach the Mumbai High Court in this regard.